Irish private debt fund managers will be able to market their funds using the Alternative Investment Fund Managers Directive’s (AIFMD) passport after the local regulator approved a new loan origination fund structure.
In gain the passport, debt funds must be structured as a Qualifying Investor Alternative Investment Fund (QIAIF) and be subject to specific investor protections and risk management safeguards covering: credit assessment, diversification, liquidity limitations, investor due diligence, leverage, disclosure, stress testing and reporting, as well as all the requirements that come with AIFMD authorization.
The funds will be open to qualifying investors including pension funds, insurers, banks and high net worth individuals that make an initial minimum investment of €100,000
It’s believed the regulator responsible for supervising the directive’s application in Ireland, the Central Bank, intends to begin accepting applications soon, according to the Irish Funds Industry Association (IFIA), a staunch supporter of the new regime.
“This is a significant development for the funds industry in Ireland. This will bring new funds, new projects and new expertise to the Irish funds industry and will position us as the clear domicile of choice for loan origination funds in Europe,” said IFIA head Pat Lardner.
The framework was created in response to stricter bank regulations, which has led to a surge in loan origination by funds in post-crisis Europe. Private debt funds have been a source of financing for small businesses especially, which policymakers view as an engine for economic growth.
“We felt, in light of developing bank regulation that we could look again at the Irish prohibition on lending by funds and, by adapting recent innovations in bank regulation to funds, develop a regulatory regime which would make lending by funds on a prudent basis practical,” Martin Moloney, head of markets policy at the Central Bank, said when the rules were first proposed in July.